Full-year earnings for companies in the index are now expected to rise roughly 35% in 2026, according to estimates cited in a Reuters analysis of the corporate profit boom. The surge has helped the S&P 500 gain about 12% this year despite higher interest rates, expensive oil and geopolitical uncertainty.
The problem is the comparison ahead. Analysts currently expect S&P 500 profit growth to slow to roughly 15% in 2027 — still above the long-term average, but less than half this year’s pace.
AI Has Powered an Exceptional Earnings Year
Artificial intelligence remains one of the biggest reasons corporate profits have accelerated.
Technology earnings have surged as Nvidia, Micron and other semiconductor companies benefit from enormous spending on chips, networking and data centers. By early September, S&P 500 earnings growth was already running above 30%, with 86% of reporting companies beating EPS estimates.
The growth is also unusually concentrated. Nvidia and Micron alone are expected to generate more than half of S&P 500 technology earnings growth, making continued semiconductor strength increasingly important to the broader index.
The AI Capex Boom Cannot Accelerate Forever
Hyperscaler AI capital expenditure is expected to climb toward $1.1 trillion next year, but the rate of spending growth is slowing. That means semiconductor and infrastructure companies may still generate higher revenue without repeating the extraordinary year-over-year gains seen in 2026.
Investors are therefore paying closer attention to whether Big Tech’s AI spending is actually producing sufficient returns, rather than rewarding higher capex by itself.
Borrowing costs are another risk. The U.S. 10-year Treasury yield has climbed above 5.3%, raising financing costs across the economy and increasing the return investors can receive from bonds without taking equity risk.
S&P 500 Valuations Are Already Adjusting
The market is beginning to reflect those concerns.
The S&P 500’s forward price-to-earnings ratio has fallen from around 22 to 19.2, even while earnings estimates continued rising.
That moderation is especially important because AI-linked companies now dominate the S&P 500’s largest positions, leaving the index unusually sensitive to any slowdown in the investment cycle.
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